FAQ: Debts and disputes

Thursday 1 January 2009 19.01 EST
First published on Thursday 1 January 2009 19.01 EST

What is at the heart of the standoff?

The two sides cannot agree on three main points. First, how much Ukraine should pay for gas delivered in November and December. Russia's Gazprom claims it is owed $2bn in overdue payments and fines; Ukraine's Naftogaz says these claims are "incorrect". Second, what rate Ukraine should pay for gas in 2009; Russia says it is charging less than half what most European countries pay. And third, how much Russia should pay for its gas to be piped through Ukraine to major European markets.

Why do disputes keep recurring?

Ukraine has a stronger negotiating position with Russia than many former Soviet bloc countries because its pipelines are a vital gateway to the major markets of western Europe.

Who is likely to prevail?

Russia, which controls about a third of world reserves, seems to hold most of the top cards. It takes a tough line with ex-Soviet states, raising prices to reflect an end to Communist-era subsidies. Ukraine's economy is in a mess but it is unlikely to avoid having to swallow more price rises.

Will western Europe be hit?

Pipeline pressure in some European states dropped by up to 40% for a spell last time Russia turned off the taps to Ukraine. This time Russia says it will increase the amount piped through Ukraine to other European customers.

Is this a political dispute?

Russia has been accused of trying to curb neighbouring countries' attempts to pursue pro-western agendas. Critics of Ukraine have suggested attempts to cast its powerful neighbour as an economic bully are overblown.